Common input service credit requires proportionate reversal when shared with non-service investment activity, with extended limitation and penalties applicable.

Common input services used for taxable output services and own-account investment in securities must be apportioned because investment is neither manufacture nor a taxable or exempted service. Full CENVAT credit is unavailable to the extent attributable to the investment activity, requiring proportionate reversal of credit on shared office-running services. Non-maintenance of separate records and failure to reverse the attributable credit may support invocation of the extended limitation period and consequential penalties where the relevant investment activity and income were separately recorded but proportionate credit was not reversed. The demand and related consequences remain sustainable on this basis.

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Issues: (i) Whether full CENVAT credit was admissible on common input services used for taxable services and for investment in securities, an activity not amounting to a service; (ii) Whether the extended period of limitation and penalties were invocable for failure to reverse the proportionate credit.

Issue (i): Whether full CENVAT credit was admissible on common input services used for taxable services and for investment in securities, an activity not amounting to a service.

Analysis: Purchase and sale of securities on own account constituted investment and not trading or any taxable or exempted service. However, the disputed housekeeping, consultancy, communication, courier, advertisement and training services were common office-running input services and were not exclusively attributable to taxable output services. The governing principle applied was that credit is unavailable to the extent common input services are used for an activity outside the scope of manufacture and service; the attributable credit must be segregated and excluded through proportionate reversal.

Conclusion: Full CENVAT credit was not admissible; proportionate credit attributable to the investment activity was required to be reversed. The issue is decided against the assessee.

Issue (ii): Whether the extended period of limitation and penalties were invocable for failure to reverse the proportionate credit.

Analysis: The applicable precedent treated non-maintenance of separate records and non-reversal of credit attributable to the non-service activity as justifying extended limitation and consequential penal action. The investment activity, related profits and its proportion in total income were separately recorded and disclosed during investigation, while proportionate credit on common input services was not reversed.

Conclusion: Invocation of the extended period of limitation and imposition of penalties were justified. The issue is decided against the assessee.

Final Conclusion: Credit attributable to common input services used for a non-service investment activity is unavailable, and the fiscal demand and related consequences remain sustainable.

Ratio Decidendi: Where common input services are used both for taxable output services and an activity that is neither manufacture nor service, CENVAT credit is unavailable to the extent attributable to that non-service activity and must be reversed proportionately.

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